6 rights of merchandise every indie retailer should copy from Costco

Sol Price was a legendary retailer whose Price Club, founded in 1976, eventually merged with Costco. He is attributed with creating the buying and merchandising philosophy that is still proudly posted in each Costco store. I’ve taken some time to consider how these “Six Rights of Merchandise” might apply to independent retailers.

1. Right Merchandise You can provide the most amazing customer service, and a welcoming environment – but if you don’t have what your customers want, they’re going to leave empty-handed. While it is not practical to emulate Costco’s specialization in private label items, we do need to concentrate on having the right inventory for our store. It’s worth noting that Costco curates its selection to only top sellers (as does Trader Joe’s), with an emphasis on making sure core items are always in stock.
2. Right Place The ability to carry items appropriate to your demographic area is one of the advantages of being an independent retailer. Most of our big box competitors don’t do this as successfully as Costco, providing us with an opportunity that should not be overlooked.
3. Right Time According to Mya Ditas, Costco has a philosophy of “early in, early out” for seasonal merchandise. Customers know the goods are not stocked in depth, so they will mostly likely sell out before the holiday arrives. This encourages them to shop earlier than they would have otherwise. Only you can decide whether this is an idea worth considering for your store.
4. Right Quantity Computerized just-in-time ordering and huge warehouses allow Costco to constantly replenish their inventory, so they are never over-inventoried on items. That’s trickier for us to do. But it’s worth keeping in mind that carrying too much stock ties up both shelf space and inventory dollars.
5. Right Condition An emphasis on high quality is essential to Costco’s success – as well as ours. If merchandise doesn’t live up to a customer’s expectations, you need to refund or replace it in order to maintain a reputation for excellence.
6. Right Price We can admire the fact that Costco’s success is based in part on selling at a low cost and high volume – but without their huge buying power, we can’t compete in this arena. It’s also not possible for us to operate at the low margins of a club retailer. We can, however, shop for specials to offer customers good deals – and keep our price points within the range that our customers seem to be comfortable with.

Stocking the right merchandise is key to customer satisfaction. This is as true for independent retailers as it is to Costco, and it’s helpful that Costco provides us with a reminder of this whenever we step inside one of their stores.

Carol Schroeder is the author of Specialty Shop Retailing and co-owner of Orange Tree Imports.

See also:

• Lessons from fine dining that you can apply to your store | Carol Schroeder
• The NRF’s 2024 top 100 retailers list reflects a ‘post-pandemic return to normal’